2020 SACSS 3N POA EOY P1 Q3

3 Glennda Tutors provides tuition services to students. It rents out a room to a lawyer. Rental income received during the year ended 31 December 2019 was $24 000. Rental income of $4800 had yet to be received on 31 December 2019.

REQUIRED

a. Calculate the rental income for the year ended 31 December 2019.

[1]

b. Explain the Revenue Recognition Theory as applied to this business.

[1]

c. Prepare all journal entries to account for the rental income for the year ended 31 December 2019, including the closing entry. Narrations are not required.

[6]

[TOTAL 8]

SOLUTION
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a)

Rental income  =  $24 000 + 4800 

                                  =  $28 800

b)

According to the revenue recognition theory, revenue is recognised when   

          goods are sold and delivered or services are performed by the business  

          during the accounting period.

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